– New Jersey
Since his election in 2010, New Jersey Governor Chris Christie has presided over a historic surge in business tax subsidies, awarding over $4 billion dollars in subsidies to large corporations.
In 2013, Gov. Christie signed into law the N.J. Economic Opportunity Act (EOA), effectively streamlining the state’s five economic development subsidy programs into two: the Economic Redevelopment Growth Program and the Grow New Jersey tax credit. The consolidation increases the maximum amount individual companies can receive, allows more generous awards, and removes the cap for most subsidies. Since the restructuring of the subsidy programs, the amount of awards to businesses has more than doubled. New Jersey Policy Perspectives found that during the first six months of following the enactment of the law, there was a dramatic acceleration of the state’s monthly subsidy expenditures. The group's report warned of the dramatic risk the surge in subsidies posed to the state’s economy: “New Jersey is projected to lose at least a cumulative $2.9 billion in revenue due to the subsidy surge – and that’s just over the next five years, according to the EDA’s own projections.”
On the other hand, NJ Future published a report in December 2014 reviewing New Jersey’s subsidy ecosystem post-EOA, and found that programs were generally successful in steering economic development projects to smart-growth locations. Furthermore, as reported by The [Bergen County] Record, some evidence shows that the restructuring may have allowed for more efficient targeting of smaller grants to smaller firms.
New Jersey’s subsidy programs
The EOA shifted New Jersey economic development programs to focus on two primary functions: development projects and job creation.
The Economic Redevelopment and Growth Program functions as the primary subsidy program for development projects, providing benefits for both residential and commercial projects in areas targeted for growth by the state. As it exists today, ERG is an expansion of a program originally enacted in 2009 which functioned as New Jersey’s version of tax increment financing (TIF). This program radically deregulated TIF in the state by allowing the diversion of 19 different state and local tax revenue streams to fund private development—far more than any other state. The state’s first use of the program subsidized the relocation of the Depository Trust & Clearing Corporation headquarters from Manhattan to the tune of $14.6 million. (DTCC also received a subsidy worth $74.6 million through the now-defunct Business Employment Incentive Program (BEIP) – see below). New Jersey calls the jobs “new” even though some of the company's employees were likely New Jersey residents to begin with.
For residential projects receiving benefits through ERG, a tax credit of up to 20 percent of the project’s total cost is available with bonus incentives for including affordable housing units. Commercial projects in targeted areas are eligible for a grant reimbursement of up to 40 percent of total project costs. The grant can be paid from various taxes generated by the project, including sales, corporate income and hotel occupancy. Developers must demonstrate a financing gap between project costs and available private financing. According to the New Jersey Economic Development Authority, 18 ERG projects have been approved for a total of over $421 million since passage of the EOA. Of those 18, over half of the program’s total cost went to one subsidy worth over $223 million to Sayreville Seaport Associates, a subsidiary of Prudential (see below).
The Economic Opportunity Act established the Grow New Jersey Program as the primary subsidy for job creation. Eligible companies must commit to a minimum of 35 new jobs or 50 retained jobs and can qualify for transferable tax credits per job for up to 10 years. Companies located in certain targeted areas (known as Garden State Growth Zones) or near transit qualify for bonus awards worth as much as $150,000 per job over a 10 year term. According to the EDA, $1.7 billion in subsidies have been awarded to 88 projects through the Grow NJ Program. The assistance reflects an estimated promise of over 10,200 new jobs and the retention of more than 12,800 existing jobs.
Unsurprisingly, over 40 percent of the $1.7 billion in Grow NJ subsidies have gone to just four companies: nearly $225 million to JPMorgan Chase Bank, $260 million to Holtec International, $117 million to Subaru of America and $107 million to Lockheed Martin Corporation to relocate facilities from another New Jersey location (see below).
Though now phasing out, New Jersey’s most notorious economic development subsidy was the Business Employment Incentive Program (BEIP), which functioned as the state’s deal-closing fund. Since the program’s inception in 1996, over $1.5 billion in grants were executed through BEIP. Because it was based on a diversion of state personal income taxes, the largest BEIP grants went to the biggest employers in the state. Goldman Sachs has been awarded at least four separate BEIP grants; one alone was valued at $164 million (see below). In 2005 Verizon got a $64 million BEIP grant plus more than $10 million in other subsidies. The ballooning cost of the program at one point necessitated the EDA to issue bonds in order to meet its BEIP debt obligations to subsidized companies.
In spring of 2011, Panasonic was approved for $102.4 million in credits through this program for a nine-mile move, from Secaucus to Newark.
In 2007, New Jersey Policy Perspective and its allies won two major reforms to the state’s economic development practices. The first reform required company-specific online reporting of individual subsidy deals, but the law has never been implemented. The second reform was a mandated unified development budget (which has yet to be produced). Incredibly, the state did not publish its first tax expenditure budget, which describes the cost of some tax credit programs, until 2010.
New Jersey does not produce a subsidy disclosure database, but it does report company-specific subsidy information for its current and legacy subsidy programs in comprehensive Incentives Activity Reports, including BEIP, BRRAG, ERG, Grow New Jersey, and the Urban Transit Hub Tax Credit on the New Jersey Economic Development Agency’s website.
At the time we did our Show Us the Subsidies report, New Jersey had online disclosure for only two of the five major programs we examined: BEIP and Business Retention and Relocation Agreement Grants. After our report was issued, online disclosure began for Economic Redevelopment Growth Grants. The state still does not provide online disclosure for the two other major programs: Urban Enterprise Zones and the Research and Development Tax Credit.
Key Subsidy Programs
|Subsidy Program||Recent Annual Cost||Online Recipient Disclosure||Recipient Disclosure Score*||Job-Creation/Job-Quality Score**||Monitoring/Enforcement Score***|
Business Employment Incentive Program (BEIP)
large cash grants to new or expanding businesses based on the value of new employees' personal income tax withholding (phasing out)
|$275 million (FY2014)||
Economic Redevelopment and Growth (ERG) Grant Program
controversial TIF program that allows up to 75% of 19 different state and local taxes to be used to subsidize private development
|$99.0 million (2012)||
Film Production Tax Credit
tax credit in an amount equal to 20% of qualified production expenses
|$1.1 million (FY2014)||
|0/100||not included||not included|
Grow New Jersey Assistance Program
corporate business and insurance premiums tax credits for job creation/retention
|$27.7 million (approvals made in 2012)||
|21/100||not included||not included|
Urban Enterprise Zone Program
sales and use tax exemptions, property tax abatements, and corporation business tax credits linked to hiring and capital investment for companies in designated zones
|$132.6 million (FY2013)||
* The score is derived from the Good Jobs First report Show Us the Subsidized Jobs (January 2014).
** The score is derived from the Good Jobs First report Money for Something (December 2011).
*** The score is derived from the Good Jobs First report Money-Back Guarantees for Taxpayers (January 2012).
Major Subsidy Deals
Goldman Sachs (2002)
In January 2002, only a few months after the 9/11 attack prompted many financial firms to start dispersing their operations geographically away from Lower Manhattan, Goldman Sachs announced that it would move a substantial portion of its trading and research operations across the Hudson River to Jersey City. New Jersey massively subsidized the relocation by providing a ten-year, $164 million Business Employment Incentive Program grant. The award, the largest ever in the BEIP program, was based on the assumption that 2,000 employees would make the move, though there were reports that Goldman Sachs might locate 5,000 people in Jersey City.
Later in 2002, the firm narrowed the scope of the operations that were to be relocated, and the size of the planned Jersey City complex was reduced. In 2004 Goldman completed a 42-story tower – the tallest building in the state – to house some 3,600 employees. In 2007 Goldman decided to resurrect its plan for a second tower in Jersey City and was awarded a 20-year abatement on local taxes. The Jersey City branch of the NAACP protested the deal, noting that Goldman had not live up to its previous promise to hire local residents. (Key sources)
Depository Trust and Clearing Corporation (2009)
New Jersey once again engaged in job piracy in 2009 when it offered the Depository Trust and Clearing Corporation more than $90 million in state and local subsidies to move 1,600 high-paying jobs across the Hudson River from Manhattan to Jersey City. Most of the money – $74.6 million – came through the state’s controversial Business Employment Incentive Program, which allows companies to keep up to 80 percent of the state personal income tax withheld from the paychecks of certain employees.
Despite the unusually high value of the BEIP grant, the state threw in another $14.6 million under the recently enacted and even more controversial Economic Redevelopment and Growth (ERG) grant program, which involves the diversion of up to 19 state and local tax streams. Jersey City contributed $1 million more in the form of Urban Enterprise Zone grants. The watchdog group New Jersey Policy Perspective put out a statement saying that it was “irresponsible” to have given Depository Trust the ERG grant after it had already committed to the move. (Key sources)
JPMorgan Chase Bank (2014)
As part of its surge in megadeals to wealthy corporations since passing the Economic Opportunity Act of 2013, New Jersey awarded JPMorgan Chase Bank a subsidy worth nearly $225 million over 10 years through the Grown New Jersey Program. The subsidy is intended to aid the company in expanding its technology and operations facility in Jersey City. In exchange, JPMorgan Chase must relocate 2,612 employees at other New Jersey locations and add 1,000 new jobs, either by relocating workers, or creating new positions. The bank must invest $77 million to build out its existing offices space in Jersey City.
Wal-Mart in New Jersey
- At least 3 Wal-Mart locations have received subsidies worth about $1.7 million in New Jersey.
- At least 1 Wal-Mart location in New Jersey has challenged its property tax assessment.
- Wal-Mart was found to have more workers than any other employer in the state relying on publicly-funded health insurance. This shows how taxpayers end up subsidizing Wal-Mart’s policy of providing low wages and inadequate benefits.
For more information, see the New Jersey page of Wal-Mart Subsidy Watch.